21 and starting career, need advice

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Topic Author
RedJayLA
Posts: 5
Joined: Tue Jul 30, 2019 1:01 am

21 and starting career, need advice

Post by RedJayLA » Tue Jul 30, 2019 1:57 am

Hello folks!
I read Malkiel and Ellis' "Elements of Investing" at 17 and the rest was history. :moneybag I've followed this forum and the late Mr. Bogle for years. I am quite certainly better off because I discovered this movement, and for that I thank you all.
I'm 21 and beginning my career in government. I'll be making $29,000 a year with excellent health, vision, dental, and a phenomenal pension plan. This position offers excellent job security and guaranteed 5-8% yearly raises, as well as good overtime opportunities. A few years in and I should have a pretty decent salary. I can absolutely do better, but this area of public service is something I've dreamt of since I was a young lad.

My financial situation is as follows:
-no debt
-$25,000 in Vanguard IRA
-$35,000 in Vanguard taxable
-$15,000 in checking, savings, I-bonds, and the face value of my coin and currency collection, all considered part of my emergency fund, with different tiers for different situations.
-last net worth analysis yielded a result of $77,000 as of July 15.
-virtually no expenses as I live at home and drive a used Honda

I should take home around $22,000 each year after taxes and pension. $6000 will go to my Roth, $4800 to housing fund to save for down payment, $2400 to my transportation fund to pay for fuel, maintenance, and replacing vehicle, $3600 to my brokerage, $1200 for food, $1200 for personal (entertainment, clothing, etc.), and the remainder to help support the household and cover incidentals.

My pension will allow me to retire at 55 with 100% pay. Government insurance will cover me at the same rate I pay at retirement until I reach Medicare age.

My Roth IRA is expected to be funded at 100% as the #1 budget priority of each fiscal year, barring emergencies.

I'm offered a 457 though Nationwide, but the fees are relatively high.

Cost of living in my area is below the national average.
I plan to live at home for one year until I'm off of new-hire probation and then consider renting or buying. Credit score is 780ish with 9 credit cards used to maximize rewards. Just passed $100,000 in available credit and I'm not sure whether to be proud of that or terrified at the irresponsibility of lenders to give a 21yo $100k in credit- even a responsible and well-qualified one. Balances always paid in full and no annual fees. I'm single. I expect a mid-six-figure inheritance at some point, but hopefully far off due to how much I care about this relative.

So, that being said...
1. Does my net worth seem sufficient? I feel like I should be proud of that $77k, but my anxiety gets the best of me and I just think how fast that money will be gone should something catastrophic happen.
2. Given the mediocre 457, should I just throw everything I have at my taxable once my Roth is maxed? No HSA or Roth 457 options unfortunately.
3. I'm not sure whether I'm more afraid of renting or buying a home. I'm more than welcome to stay at home indefinitely, but my pride dims as I age. Should I be looking to rent, buy, or stay put a little longer? I can easily afford a downpayment and a 30yr note on a mid-size house in my area. There are a hundred ways I can cut my budget and bring in extra income.
4. I guess I'm just kind of freaking out because the day has come when I'm an "adult." I'm excited and terrified and would feel better if others look over my situation to tell me what I'm doing right - and what I can do better.
5. I'm offered long and short term disability options through The Standard. Not sure of the rates yet, but would you recommend either to someone in my situation if rates are fair?

Thanks for any and all help. My apologies for anything that doesn't make sense. You guys and gals are like my heroes and I'm nervous because I don't want to make too much of a fool of myself. :D

deltaneutral83
Posts: 1233
Joined: Tue Mar 07, 2017 4:25 pm

Re: 21 and starting career, need advice

Post by deltaneutral83 » Tue Jul 30, 2019 7:50 am

Life will happen so don't worry about 30 year pension and things like that. If you max out a Roth from 21 on (and that's all you do) at 38 you will be amazed at the progress. Living at home at 21 is no problem, most people finish college at 22 and some who take the "victory lap" are 23. Don't forget to enjoy your 20's. Seems like you will avoid the common pitfalls of credit card interest, fast cars, and buying a house or too much house too young and you have aced the travel game/rewards. Travelling and those experiences are usually viewed upon with much more fondness than material possessions later in life.

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Sandtrap
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Re: 21 and starting career, need advice

Post by Sandtrap » Tue Jul 30, 2019 7:58 am

RedJayLA wrote:
Tue Jul 30, 2019 1:57 am
Hello folks!

So, that being said...
1. Does my net worth seem sufficient? I feel like I should be proud of that $77k, but my anxiety gets the best of me and I just think how fast that money will be gone should something catastrophic happen.
2. Given the mediocre 457, should I just throw everything I have at my taxable once my Roth is maxed? No HSA or Roth 457 options unfortunately.
3. I'm not sure whether I'm more afraid of renting or buying a home. I'm more than welcome to stay at home indefinitely, but my pride dims as I age. Should I be looking to rent, buy, or stay put a little longer? I can easily afford a downpayment and a 30yr note on a mid-size house in my area. There are a hundred ways I can cut my budget and bring in extra income.
4. I guess I'm just kind of freaking out because the day has come when I'm an "adult." I'm excited and terrified and would feel better if others look over my situation to tell me what I'm doing right - and what I can do better.
5. I'm offered long and short term disability options through The Standard. Not sure of the rates yet, but would you recommend either to someone in my situation if rates are fair?

Thanks for any and all help. My apologies for anything that doesn't make sense. You guys and gals are like my heroes and I'm nervous because I don't want to make too much of a fool of myself. :D
Welcome
1. Outstanding. As far as catastrophe, that's what a decent EF is for.
2. Yes
3. Stay as long as needed (but no longer) to build up your EF, security deposit needed to rent, several months rent saved (just in case), pay down any existing CC or other debt.
Then, "flight feathers strong and filled in", go fly on your own as nature intended.
Once moved out, beware: parasitic roomates, parasitic friends, etc.
4. Being an "adult" is not age related. There are 60 year old iresponsible "kids" with not a dime saved, let alone earned.
**Being an adult is an evolving state of mind and heart reflected in one's lifestyle and relationships, etc.
(Read: "Life Code" by Dr. Phil).https://smile.amazon.com/Life-Code-Rule ... 195&sr=1-1
5. Yes. If rates are fare.

Congratulations on your successes and maturity. The fact that you are here on the forum asking questions is a wonderful sign of great things to come.

j
Wiki Bogleheads Wiki: Everything You Need to Know

Topic Author
RedJayLA
Posts: 5
Joined: Tue Jul 30, 2019 1:01 am

Re: 21 and starting career, need advice

Post by RedJayLA » Tue Jul 30, 2019 1:01 pm

Thanks for the insightful replies!

Are there any other ways I could be saving outside of the taxable? I'll have the pension (hopefully), my maxed Roth, and an enormous taxable account. I feel like there are more ways to save tax-advantaged funds, but with no HSA, mediocre 457, and the Roth and I-bonds already strategically deployed, I'm running out of options.

The taxable is set up to be very tax-efficient, but still. :D

tioscrooge
Posts: 40
Joined: Wed May 25, 2016 10:01 pm
Location: Pacific NW

Re: 21 and starting career, need advice

Post by tioscrooge » Tue Jul 30, 2019 11:48 pm

Consider converting your vanguard ira to a Roth IRA now while your tax bracket is low
Whether you think you can or you can not, you will be correct.

medic
Posts: 27
Joined: Thu Jul 18, 2019 11:30 am

Re: 21 and starting career, need advice

Post by medic » Wed Jul 31, 2019 3:50 am

If your state offer a deduction for 529 funding you may want to put $$ there. Could be for yourself to go back to school or an early start for a future seedling. But that'd be quite low on my list at your age.

Personally, your AA looks pretty conservative and with 30+ years to go, you can ride out a recession without it mattering. You've got ~20% of your net worth in your e-fund and your actual expenses you'd need to fund in an emergency are ~$2-3K/year.

For ST/LT disability, I'd certainly look into it. Either from the firm your employer is offering or externally. Much more likely to get hurt than to be killed.
Also, don't plan on inheritance. That's just icing if it comes.

retiredjg
Posts: 37388
Joined: Thu Jan 10, 2008 12:56 pm

Re: 21 and starting career, need advice

Post by retiredjg » Wed Jul 31, 2019 7:07 am

You are doing fine. In fact, you are doing more than fine. :happy Having anxiety over all this is not reasonable. See what you can do to get a handle on this lest you turn into a miserable miser.

Chances are your 457 is not as bad as you think. You might want us to have a look at it. Even if it is mediocre, you need to use it. However, I think you may not want to use it just yet.

You say your take home pay is $20k after taxes and pension. Do you know what your actual taxable income is? Your tax bracket?

It appears to me you are in the 12% or maybe even in the 10% federal tax bracket. Deferring taxes at that tax rate would not be high on my list. It is very unlikely your tax rate will ever be lower than that. Better to fill the Roth IRA and save in a taxable account in my opinion. But when you reach the 22% tax bracket, you definitely want to start using that 457 plan.

It is unclear if your current IRA is traditional or Roth. If it is traditional, you might want to consider doing a Roth conversion while in your low tax bracket.

Back to your anxiety. I think you've got the money part of life conquered already. Yes, you can have a disaster, but you should recover quickly from that. Many people do and you have better money skills than most. It is a little concerning that you mention things like "anxiety" and being "freaked out". Is it possible that you've paid so much attention to finances that your life is lacking some balance right now? Do you have other interests? Are you having plenty of fun?

Topic Author
RedJayLA
Posts: 5
Joined: Tue Jul 30, 2019 1:01 am

Re: 21 and starting career, need advice

Post by RedJayLA » Wed Jul 31, 2019 8:06 am

Very little fun. I'm working on that... :happy

I had a rough childhood and money was always tight growing up with a single mother after my father died. The only reason we survived was because of life insurance. I think that has caused me to be so good with money, with the drawback that finance is a major source of anxiety in my life. We went from upper middle class to a maxed out health policy and a million dollars in medical debt in the span of three years. An unemployed widow with no work experience had little chance without life insurance and good lawyers. I know better than most how fast things can go wrong.

The IRA is a Roth. All allocations are 100% to Vanguard S&P indexes for both taxable and the Roth. $6000 of my cash is already reserved to fund the 2020 IRA in full on the first business day of the new year.

retiredjg
Posts: 37388
Joined: Thu Jan 10, 2008 12:56 pm

Re: 21 and starting career, need advice

Post by retiredjg » Wed Jul 31, 2019 8:22 am

RedJayLA wrote:
Wed Jul 31, 2019 8:06 am
Very little fun. I'm working on that... :happy

I had a rough childhood and money was always tight growing up with a single mother after my father died. The only reason we survived was because of life insurance. I think that has caused me to be so good with money, with the drawback that finance is a major source of anxiety in my life. We went from upper middle class to a maxed out health policy and a million dollars in medical debt in the span of three years. An unemployed widow with no work experience had little chance without life insurance and good lawyers. I know better than most how fast things can go wrong.
Ok. That's a lot to work through and does explain a lot.

Do work on having some fun. It will make your mom happy. :happy

daheld
Posts: 609
Joined: Wed Sep 13, 2017 8:14 am
Location: STL

Re: 21 and starting career, need advice

Post by daheld » Wed Jul 31, 2019 9:09 am

You are light years ahead of where most people are at 21. Your income is not insanely high, but that doesn't matter because you're planning well and willing to live within your means.

I'll agree with other posters that you should allow yourself to enjoy the fruits of your responsibility every once in a while.

Kudos on your accomplishments thus far.

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steadyeddy
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Joined: Tue Mar 31, 2009 5:01 pm
Location: The Alps of the Midwest

Re: 21 and starting career, need advice

Post by steadyeddy » Wed Jul 31, 2019 9:22 am

You’re doing amazing! Got a great job with no debt and a lot of savings. Government work is a marathon not a sprint, so try to live in the present and enjoy life a little.

Get your financial plan on auto-pilot ASAP so you can focus on new goals:
-Date someone that makes me happy
-Make friends with a boat owner
-Try a new food each month
-Visit a new country

I’m not saying don’t save. I’m saying let your saving be boring and automatic, and then focus on more interesting things.

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CyclingDuo
Posts: 2498
Joined: Fri Jan 06, 2017 9:07 am

Re: 21 and starting career, need advice

Post by CyclingDuo » Wed Jul 31, 2019 11:36 am

RedJayLA wrote:
Tue Jul 30, 2019 1:57 am
Hello folks!
I read Malkiel and Ellis' "Elements of Investing" at 17 and the rest was history. :moneybag I've followed this forum and the late Mr. Bogle for years. I am quite certainly better off because I discovered this movement, and for that I thank you all.
I'm 21 and beginning my career in government. I'll be making $29,000 a year with excellent health, vision, dental, and a phenomenal pension plan. This position offers excellent job security and guaranteed 5-8% yearly raises, as well as good overtime opportunities. A few years in and I should have a pretty decent salary. I can absolutely do better, but this area of public service is something I've dreamt of since I was a young lad.

My financial situation is as follows:
-no debt
-$25,000 in Vanguard IRA
-$35,000 in Vanguard taxable
-$15,000 in checking, savings, I-bonds, and the face value of my coin and currency collection, all considered part of my emergency fund, with different tiers for different situations.
-last net worth analysis yielded a result of $77,000 as of July 15.
-virtually no expenses as I live at home and drive a used Honda

I should take home around $22,000 each year after taxes and pension. $6000 will go to my Roth, $4800 to housing fund to save for down payment, $2400 to my transportation fund to pay for fuel, maintenance, and replacing vehicle, $3600 to my brokerage, $1200 for food, $1200 for personal (entertainment, clothing, etc.), and the remainder to help support the household and cover incidentals.

My pension will allow me to retire at 55 with 100% pay. Government insurance will cover me at the same rate I pay at retirement until I reach Medicare age.

My Roth IRA is expected to be funded at 100% as the #1 budget priority of each fiscal year, barring emergencies.

I'm offered a 457 though Nationwide, but the fees are relatively high.

Cost of living in my area is below the national average.
I plan to live at home for one year until I'm off of new-hire probation and then consider renting or buying. Credit score is 780ish with 9 credit cards used to maximize rewards. Just passed $100,000 in available credit and I'm not sure whether to be proud of that or terrified at the irresponsibility of lenders to give a 21yo $100k in credit- even a responsible and well-qualified one. Balances always paid in full and no annual fees. I'm single. I expect a mid-six-figure inheritance at some point, but hopefully far off due to how much I care about this relative.

So, that being said...
1. Does my net worth seem sufficient? I feel like I should be proud of that $77k, but my anxiety gets the best of me and I just think how fast that money will be gone should something catastrophic happen.
2. Given the mediocre 457, should I just throw everything I have at my taxable once my Roth is maxed? No HSA or Roth 457 options unfortunately.
3. I'm not sure whether I'm more afraid of renting or buying a home. I'm more than welcome to stay at home indefinitely, but my pride dims as I age. Should I be looking to rent, buy, or stay put a little longer? I can easily afford a downpayment and a 30yr note on a mid-size house in my area. There are a hundred ways I can cut my budget and bring in extra income.
4. I guess I'm just kind of freaking out because the day has come when I'm an "adult." I'm excited and terrified and would feel better if others look over my situation to tell me what I'm doing right - and what I can do better.
5. I'm offered long and short term disability options through The Standard. Not sure of the rates yet, but would you recommend either to someone in my situation if rates are fair?

Thanks for any and all help. My apologies for anything that doesn't make sense. You guys and gals are like my heroes and I'm nervous because I don't want to make too much of a fool of myself. :D
You're doing great!

Yes, continue to fill as much Roth space as you can at your young age and income situation. Dollar cost averaging into the Roth IRA each month will pay handsome dividends come 30 - 40 years from now. Keep your savings on automatic pilot through thick and thin, and enjoy your friendships, work, extended family, etc... without worrying too much about money. Your early saving provides you with the power of time and compounding...

https://www.barrons.com/articles/retire ... yptr=yahoo
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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marti038
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Location: Birmingham, AL

Re: 21 and starting career, need advice

Post by marti038 » Wed Jul 31, 2019 3:41 pm

I think you're doing great. I wish I had been in that sort of shape when I was 21. My net worth was definitely below zero at that time.

One recommendation I'd make is to consider whether or not you want to have children one day. If so, personally, I'd want to think of ways to boost that income a bit. Kids are expensive.

Also, I'd live at home as long as I could stand it and try to save enough to either buy a place outright or put a healthy down payment on a house.

Topic Author
RedJayLA
Posts: 5
Joined: Tue Jul 30, 2019 1:01 am

Re: 21 and starting career, need advice

Post by RedJayLA » Wed Jul 31, 2019 4:24 pm

No kids. Neverrrrr! Unless I start a mining company and need cheap labor... :twisted: :D

I get a significant raise once I'm off of new-hire probation, and my minimum salary if I score the lowest on my performance reviews will be a hair under $40k five years in. With mandatory overtime, closer to $60k probably. That would put me well above the median household income in my state and almost triple the MHI of my city. Low cost of living plays to my favor.

One employee last year made more in overtime than their base salary. It seems as though I have quite a bit of flexibility in determining my total compensation.

Topic Author
RedJayLA
Posts: 5
Joined: Tue Jul 30, 2019 1:01 am

Re: 21 and starting career, need advice

Post by RedJayLA » Sat Aug 17, 2019 4:33 am

Just as an update, the 457 only offers one election: a fixed account with 1% ER. Super disappointing. :|

I think I'll stick to my taxable once I max my Roth. Same boring thing I've been doing for years, but it works. Boring is good when it comes to finances.

I'd like to find some place else to stash, but maybe it's time to realize that I'm better off than most and should start enjoying myself a bit.

mancich
Posts: 685
Joined: Fri Sep 05, 2014 2:05 pm

Re: 21 and starting career, need advice

Post by mancich » Sat Aug 17, 2019 4:58 am

RedJayLA wrote:
Wed Jul 31, 2019 4:24 pm
No kids. Neverrrrr! Unless I start a mining company and need cheap labor... :twisted: :D

I get a significant raise once I'm off of new-hire probation, and my minimum salary if I score the lowest on my performance reviews will be a hair under $40k five years in. With mandatory overtime, closer to $60k probably. That would put me well above the median household income in my state and almost triple the MHI of my city. Low cost of living plays to my favor.

One employee last year made more in overtime than their base salary. It seems as though I have quite a bit of flexibility in determining my total compensation.
You're doing great and should be proud of yourself. However, while you are sure at your age that you never want kids, the future you may change your mind; it happens all the time :sharebeer

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